Public Schools and Money

August 10, 2012

U.S. schooling may be on a historic glide path toward lower per-pupil resources and significant labor-force reductions. If not thoughtfully considered, budget-balancing decisions could damage learning opportunities for schoolchildren, say James W. Guthrie, a senior fellow and former director of education policy studies, and Elizabeth Ettema, a research associate in education policy, at the George W. Bush Institute.

Many members of the general public and the policy community believe that school districts are going bankrupt, teachers are underpaid and educator layoffs are rampant. Inaccurate media reporting, naive celebrity comments, education-advocate laments and talk-show dialogue reinforce this view.

What are the facts?

Total K-12 public school spending approaches $700 billion annually.

Inflation-adjusted per-pupil school spending has increased over the last century by, on average, 2.3 percent per year.

There have been a few plateau years during recessions, but never a significant decline.

As a consequence, the United States now spends more money on K-12 schooling than any other nation in the world. Achievement levels in the United States are not commensurate with spending, however.

A new normal of public-sector fiscal austerity is emerging. If the entire public education system could be rendered more productive, that is, if higher levels of achievement could be coaxed from existing resource levels, some of the pain could be avoided or at least mitigated.

What can be done by state and district officials to wring the maximum effect out of every dollar?

States and districts can discontinue costly practices that have not been shown to enhance student achievement, including paying educators for out-of-field master's degrees and salary premiums for experience; following "last in, first out" personnel provisions; relying on regular classroom instructional aides; and adhering to mandated limits on class size.

Regulations that mandate inefficiency, such as legislatively precluding outsourcing, requiring intergovernmental grants to "supplement not supplant" existing spending, and prohibiting end-of-budget year surplus carryover, can also be revised to encourage smarter spending.

In place of the practices above, states and districts can adopt strategies that foster efficiency at both the school and district level, such as adopting "activity-based cost" (ABC) accounting; empowering principals as school-level CEOs; adopting performance-based dollar distribution formulas and school-level financial budgeting; centralizing health insurance at the state level; and outsourcing operational services where proven to save money.